Taylor Wimpey cuts housing targets in ‘subdued’ market

Shares in Taylor Wimpey, the London-listed housebuilder, dropped 4.5% on Wednesday following cuts to its housing and profit targets due to a "subdued" property market. The builder cited rising mortgage rates caused by the Iran war as deterring potential buyers from purchasing new homes, which has slowed the Autumn homeselling season.

Taylor Wimpey now anticipates constructing 10,500 homes this year, short of its March-set target of 10,600-11,000. This decrease in construction could negatively impact the company's profit, as it now expects to generate operating profit within the lower end of the consensus range, estimated between £262m and £299m. CEO Jennie Daly attributed the subdued market conditions to higher mortgage rates and increased living costs, which have reduced customer affordability.

Despite the challenges, the company remains committed to supporting customers, operating efficiently, maintaining a robust balance sheet, and advancing its strategy, with plans to open additional outlets throughout the year. Comparatively, housebuyers have shown less activity this year, with Taylor Wimpey's net private sales rate at 0.69 as of the year-to-date, below last year's 0.72.

Housemarkets in recent months have worsened, with the group's sales rate declining to 0.60 in June, down from 0.63 the previous year. Analysts from Peel Hunt suggested that Taylor Wimpey is proactively managing its cost base, likely by adjusting staff numbers or, at most, limiting its regional footprint. Meanwhile, Vistry recently announced the reduction of its workforce by 4,000 employees, cutting the number of regional offices from 25 to 12.

RBC Capital Markets' analyst Anthony Codling anticipated some investors to sell their holdings in Taylor Wimpey following the company's update. He noted the focus on a more subdued Autumn market and trimmed completions guidance, with operating profit guided to the bottom end of the consensus range for the first time. While Taylor Wimpey welcomed the government's revival of the Help to Buy scheme, which provides equity loans for first-time buyers, housing experts criticized the program's £650,000 cap for inner London homes, as it might disqualify many Londoners from accessing the support.